Tuesday, May 31, 2011

...because of modern industrial and technological advances—radar, stronger yet lighter building materials, more reliable electronic warning devices, and longer-lasting packaged foods—we are better protected from nature's fury today than at any other time in human history.

While time and resources are wasted trying to *design* a pricing or regulatory framework (with all of the requisite handouts to corporate and special interests that killed Waxman-Markey) to combat climate change, the price mechanism seems to have the lead on actually dealing with it. Consider also that green technology breakthroughs in food production (like biotechnology and growth enhancing pharmaceuticals) and the consequent reductions in greenhouse gas emissions have dwarfed the impact of wind, solar, and hybrid cars. All without regulatory mandates or putting an official price on carbon. In fact, from a regulatory perspective, we've done much to limit these breakthroughs (for example recent restrictions on biotech alfalfa, sugar beets etc. while giving tax credits an subsidies to the former) likely accompanied by the applause of some of those most vocal about combating climate change.

Monday, May 30, 2011

Recently at a town hall the president responded to a 'vegetable' farmer's question (about the President's policy direction for farm programs):

'very profitable big combines are getting a lot of money from taxpayers’

The machines have taken over, combines have taken on a mind of their own and are keeping all of the farm subsidy money for themselves! But maybe the combines are our only hope for defending the planet from GMO zombie frankencrops! It is sad, but to some, these ideas aren't humor, sarcasm, or science fiction.

Seriously, I'm sure the combine statement was just another spoof. Just like President Bush and Sarah Palin or any politician in this age of multimedia, good luck with avoiding being caught on camera being human. Just hope the media is responsible and objective with the footage.

Some of this dialogue on farm subsidies goes back to the largely under-analyzed mantra repeated over and over again that most farm subsidies go to the largest wealthiest farms. As I've pointed out before here, it's true that the bulk of money spent on farm policy (of that that doesn't go to other programs) goes to larger operations, but on a dollar for income basis it's the smaller farms that benefit the most. So, the income caps would ensure that only those farms that depend the most on the subsidies would get them. However, in terms of getting the most out of our tax dollars in terms, other data (as pointed out by economist Darren Hudson at Texas Tech)shows that larger farms produce more per dollar spent. If larger farms also adopt green technologies (like biotech and autosteer technology) at greater rates than smaller farms then it is possible that they are also more sustainable.

The other issue, how to limit subsidies to 'genuine family farms.' The terms 'family farm' and 'factory farm' are often used by activists in very manipulative and political way, divorced from any real objective definition. I'm optimistic that our policy makers are more shrewd and objective. Based on USDA numbers, 98% of all farms are family farms. There is no income cutoff. And, as this farmer points out in the Huffington Post, (also consistent with my data) it doesn't take but a few thousand acres to produce revenues near or above $1 million dollars and the land and capital necessary to for even these smaller grain farms could also put net worth into the millions (which is why the death tax disproportionately penalizes family farms so heavily). Even on the net, it would make sense to have a 'risk adjusted' net worth cutoff (since farming can be an extremely financially risky operation). Doing these things would probably put means adjusted cutoffs back in the range of the top 6% of family farms. (back to wealthy profitable combines)

Lower cutoffs would probably only have the effect of propping up hobby farms, or small vegetable farmers that produce for themselves or maybe a local farmers market. But that's a dramatic shift, and a change from subsidizing staples that feed the world to novelty crops that are nice to have. Perhaps that is the answer the farmer in the town hall was looking for.

In the grand scheme of things, what to spend on agriculture is really a philosophical 'size and scope of government' question anyway. The amounts being spent make little or no difference to the budget deficit (<.5%). Long gone are the days when we were plowing under crops and slaughtering livestock to deal with the surpluses. Because the payments make up such a small part of most farmers incomes, any disincentives have been overpowered by market driven Investments in green technologies and improved production practices that have reduced any negative environmental consequences pointed out by activists that want more intervention. Even in the area of ethanol, consumers are saving about $400 /yr even netting out energy differences from gasoline and we are now exporting to Brazil.

References:

Obama calls for "revamping" of farm support system, possible income caps for subsidies
http://www.cbsnews.com/8301-503544_162-20062208-503544.html

The Face of A Giant Agribusiness - The Huffington Post
http://www.huffingtonpost.com/noah-hultgren/face-of-a-giant-agribusin_b_861502.html

Wednesday, May 25, 2011

What is the environmental impact of beef grown on grass compared to conventional beef?

Dr. Capper – "Cows grow more slowly when grass is all they eat. If all of the beef in the U.S. were grass-fed we would need an additional 64.6 million cows in order to match the amount of beef produced in 2010. That would require an additional 131 million acres of land, which is about 75% of the state of Texas. That many cows would need an additional 1,700-billion liters of water, which amounts to the annual consumption of 46.3-million U.S. households. These cows would generate an additional 135 million tons of carbon which would be like adding 26.6 million cars to the road every year. So, in terms of land, energy, water, and carbon, grass-fed beef has a much larger environmental impact than conventional beef production."

Is it more natural for a cow to eat grass instead of corn?

Dr. Capper – "Cows probably did not eat corn 500 years ago. But does it matter if it's natural as long as it improves environmental impact, food safety, and beef affordability? Almost nothing we do today is 'natural' compared to 500 years ago. We have cars and airplanes. We have treatments for cancer and heart disease. Why is it that in every other business sector we celebrate increased efficiency and productivity thanks to new technology while when it comes to food some want it done the old-fashioned way?"

Saturday, May 21, 2011

"This is good news. Agricultural subsidies cost taxpayers more than $15 billion each year, and until those subsidies are eliminated, farming in America will never be sustainable." - Baltimore Sun, May 18, 2011.

I've seen similar numbers reported recently in the New York Times as well. Bear in mind, $15 billion sounds like a lot, but it amounts to less than 1/2 of 1% of total federal spending. The data also show that small farms depend more heavily on subsidies than larger farms (often misunderstood as 'big agribusiness' or 'industrial farms' ). Eliminating subsidies then, if anything would lead to more concentration in the industry and larger farms.

So in terms of financial sustainability, then yes the article would be correct on that point, as the smaller, less financially sustainable farms may go away. But what about environmental sustainability?

The argument that eliminating subsidies will make agriculture more environmentally sustainable is tantamount to arguing that eliminating smaller farms will make agriculture more sustainable (which seems to be the opposite of what many anti-subsidy advocates want or think is sustainable)

Many of the green technologies (herbicide and pest resistant GMO crops, pharmaceuticals) used by modern farmers dwarf the impact of other consumer green technologies like hybrid cars. Many of these are 'scale neutral' (for instance, the single largest growing demographic among GMO adoption is small farmers in developing countries) so eliminating small farms that use these technologies won't help with sustainability, given they have adopted these technologies. Other green technologies in agriculture include GPS and auto steer technology. Larger scale production is likely necessary to get the most (financially and environmentally) from these technologies.

Among those most lagging in green technology adoption are organic producers, which have zero tolerance for GMOs, (although fully embracing more volatile methods utilizing nuclear radiation to breed better plants)

However, even as the market for these products is greatly expanding, it makes up a very small proportion of the food we consume (largely supplementals like fruits and vegetables vs. the staple commodities that feed the world) making organic largely irrelevant to the overall conversation about sustainability in agriculture and subsidies. I'm not sure why the article even goes down this path.

Some are arguing for a compromise, capping subsidies based on income level. That may be a way to preserve smaller farms, but doesn't really make much difference in terms of government spending and likely won't matter much in terms of sustainability without knowing more about green technology adoption rates and productivity of smaller farms. Many of the arguments for ending farm subsidies based on spending, sustainability, nutrition etc. lack empirical support. Ultimately the argument about farm subsidies comes down to your view on the role of government.

As far as the article's comments on farming like our great grandparents, I'm not sure 26 bushels an acre, no matter what the method, is going to cut it these days.

These headlines (or a version of it) are making their rounds in the media these days. They refer to a study done in Quebec. Aziz Aris and Samuel Leblanc claim to have detected herbicides and/or the insecticidal protein Cry1Ab in the blood of Canadian women, pregnant or not pregnant, and in umbilical cords. Their study / results were recently published in the journal Reproductive Toxicology (TITLE: "Maternal and fetal exposure to pesticides associated to Genetically Modified Foods in Eastern Townships of Quebec, Canada").

In April, I received an anonymous email from someone who challenged me on the results of this study (amongst other things…)

"While I can see the potential benefits of GMOs, I am uncomfortable with how readily pro-GMO scientists dismiss the gathering evidence of potential harmful impacts (such as the very recent study finding the BT toxin in mother's breast milk)."

My response was as follows – and points to problems with the methodological approach…

"I think that you are referring to the article by Aris etal and their study on the sera (blood) (as opposed to breast milk) that was published in a recent issue of Reproductive Technology (2011). I read the article and, quite frankly, have some questions regarding the methodology. First, there seems to be a lack of controls in the experimental approach. What are the serum levels of female organic farmers who spray Bt vs those conventional female farmers who plant Bt soy, corn and cotton? Bt is one of the most effective pesticides used in the organic industry and, generally, the number of applications is even higher in organic crops than in conventional/GE. What are serum levels of women who eat no corn or soy products and do not buy organic (having no exposure)? The lack of controls in this study is alarming and can account for false positives in results (I refer you to the paper in the J. Agric. Food Chem. 2005, 53, 1453-1456: "To avoid misinterpretation, samples tested positive for Cry1Ab protein by ELISA should be reassessed by another technique"). In my opinion, the Aris etal study is only moderately interesting and very, very incomplete."

As far as I can tell, there is a real problem with 'credibility' here. I question the peer review process. This is echoed in another response to this publication…

Peer review, improperly executed, leads to devastating results. Take for example, the fallout from an article published in The Lancet in 1998 (later retracted) that claimed a connection between the MMR vaccine and Autism. These claims (based on a study that was improperly reviewed) rippled through media causing an uproar (fuelled by the celeb-fluence of Jenny McCarthy, I might add) which, ultimately, led to the reduction in numbers of childhood vaccinations (bringing with it a whole other set of problems).

Science is a good thing. But key to good science is a set of checks and balances that monitors and challenges results and ensures accountability in the process.

Friday, May 06, 2011

"The crisis rolled on through the summer. Irrationality set in. All over the country, people wasted gallons of gas waiting in line for the gas they were afraid wouldn’t be there the next week. The crisis was the only news story anyone cared about. A protest outside Philadelphia turned violent. People stood guard beside their cars at night against thieves who siphoned out fuel."

From Atlas Shrugged:

“Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them….when money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips,and guns; or dollars.”

Recently, some clever bureucrats have gotten together to form a group known as the 'Oil and Gas Price Fraud Working Group.'

"And I would also note that one of the things the Attorney General task force will be looking at is coordinating with state attorneys general to make sure that we don’t have a what I’ve heard described as a “rockets-and-parachutes phenomenon,” where prices at the pump rocket up when oil prices rocket up, and yet they come down in a parachute fashion when oil prices go down. So we want to make sure that a drop in oil prices is appropriately reflected in a drop in gas prices at the pump."

Based on what I just read in the NYT above, I hope these guys don't take themselves too seriously. Of course, many people get upset about things like Exxon's recent profits reports, but as economist Mark Perry point's out at Carpe Diem, revenue from gas taxes (based on recent numbers) is almost 7 times Exxon's profit on a per gallon basis. (and we still have budget deficits).

It turns out, that consumer behavior in a competitive market (not greedy gas station owners, speculators, or oil companies) explains the "rockets and parachutes" phenomonon.

'Rockets and Parachutes (or feathers) and research here:

ASYMMETRIC PRICE ADJUSTMENT AND CONSUMER SEARCH:

AN EXAMINATION OF THE RETAIL GASOLINE MARKET

MATTHEW LEWIS

Department of Economics

The Ohio State University
(forthcoming Summer 2011 Journal of Economics and Management Strategy)

"The model predicts that consumers search less when prices are falling. This reduced search results in higher profit margins and a slower price response to cost changes than when margins are low and prices are increasing."

About Me

My primary interests are in applied econometrics with applications related to genomics, nutrition, health, and the environment. I have a quantitative and analytical background in the areas of applied economics and statistical genetics. I leverage my training with experience in machine learning and predictive modeling using SAS, R, and Python to solve problems. I can understand and produce peer reviewed research and discuss the application with a scientist, sales representative, or the customer whose problem ultimately drives the analysis. I can code my own estimators, execute SQL queries, parse text files, and visualize a social network.